Table of Contents
Introduction
The Australian Securities Exchange (ASX): 150 years strong! It’s a vital part of the Australian economy. The ASX is Australia’s primary stock, bond, and securities trading market.
Let’s look at its history and evolution. Then, significant events and regulations that have shaped it are worth a closer look:
Overview of the Australian Stock Exchange
The Australian Securities Exchange (ASX) is the critical hub for trading equities, funds, investment products, and other financial instruments in Australia. In July 2006, ASX was formed by merging the Australian Stock Exchange (AES) and the Sydney Futures Exchange (SFE). It works as a public company with a limited guarantee and is one of the world’s 15 listed securities exchanges, having an average daily turnover of A$4 billion.
In April 1987, ASX started operations with ten companies offering limited equities. Now, it has grown and has over 2,200 shares from 2,500 issuers, varying from small unlisted companies to big international firms. It also operates offshore markets for global investors, including derivatives markets and margin lending networks, which support cross-border trading. To assure compliance and regulation, ASX ensures that all companies obey strict listing rules and have a high corporate governance standard.
Apart from the traditional equity markets, there are other alternate exchanges, such as Chi-X Global Australia Pty Ltd, where small companies can trade publicly traded shares with retail investors, apart from the conventional stock exchange banks. These companies do not have to meet the particular listing requirements of more giant corporations on prominent exchanges like ASX or NASDAQ.
Early History
The ASX is the tenth-largest stock exchange globally and the biggest in Australia. It holds over 2500 companies and accounts for almost 80 percent of the Australian equity market. It began in the late 19th century when it was founded as the Sydney Stock Exchange in 1987. ASX has been through many changes and is now a leader in the financial and investment industry.
Let’s take a quick look at the early history of the ASX:
Beginnings of the Australian Stock Exchange
The Australian Securities Exchange (ASX) began in the 19th century. It was set up in Melbourne on April 22, 1851, trading only a few securities. However, by 1874, the Exchange had extended to all main cities in Australia, including Perth, Adelaide, Brisbane, and Sydney.
The ASX encountered an economic depression between 1897 and 1900. However, it carried on despite the tough conditions. Reforms in 1907 allowed investors to own certificates for their shares, apart from in Tasmania. Victoria’s reforms in 1909 meant more people were involved in the Exchange, and investment increased.
During WWI, the ASX saw many businesses go into new lines of work, such as producing weapons and war bonds. Additional changes during WWII followed this. Finally, in the 1950s, it brought in interactive electronic trading. As a result, it made it one of the most modern exchanges in the world in 1990.
Expansion of the Exchange
The Exchange has seen steady growth over the years. But in 1990, it boomed with a significant increase in clientele, including foreign institutional and retail investors. This rapid expansion was due to a modern trading platform, electronic facilities, and better corporate disclosure.
From then on, the ASX was on the up, and by 2004 it had become one of the top 10 exchanges in terms of capitalization worldwide. In addition, companies had more options to raise capital due to the global interchangeability of markets.
Today, investors can buy into public companies through ETFs, company stocks, and more. This skyrocketing demand for sound financial instruments has led to the ASX is one of the most sought-after around the globe – representing nearly half of all publicly listed companies in Australia.
Modern History
The turn of the century brought big changes to the ASX (Australian Securities Exchange). It merged with the Sydney Futures Exchange and became the Australian Securities Exchange. Percentage electronic trading was introduced too.
- Chi-X Australia trading platform was added, allowing for cross-exchange trading.
- Plus, the All Ordinaries index was replaced with the S&P/ASX 200 index.
Mergers and Acquisitions
The Australian Securities Exchange (ASX) has had numerous changes. Mergers and acquisitions have occurred as the Exchange adapted to different industries.
The most notable merger was with the Sydney Futures Exchange (SFE) in 2006. It created new products like CFDs, options, warrants, and existing securities such as stocks, bonds, and unit trusts.
In 2011, ANZ Securities Limited became active in equities and derivatives markets after merging with AOT Trading Company Pty Limited. They achieved 100% ownership when they acquired Global Invest Management Pty Ltd’s remaining shares in 2012.
That same year, Complex Securities Limited merged with OTC Australasia Pty Ltd. It allowed them to become a Full Market Participant in both cash equity markets and derivatives from June 2013. ANZ Capital joined with Investment Technology Group’s ON-EX market maker business in 2014, creating ON-IT (ON-EX Investment Technology). It provided liquidity solutions across Australian cash equity markets.
In 2018, ASX announced a digital transformation to increase efficiency and provide a better user experience. They also initiated blockchain technologies to support settlement assurance services. ASX also acquired technology provider IRESS Ltd., adding innovative trading capabilities and enhancing its digital presence.
Technology and Automation
The Australian Securities Exchange (ASX) has implemented new technologies since its launch. These include automated order routing, trading workstations with high-speed Exchange access, mobile phone applications, and web-based interfaces.
In 2020, ASX announced CHESS (Clearing House Electronic Subregister System), a blockchain-based post-trade platform. It aims to improve post-trade operations, replace the legacy structure, provide security with encryption algorithms, and simplify transfers.
In 2021, the platform was made available to the public after extensive research, development, and testing. It offers investors faster access to trade settlements, shorter timeframes for corporate actions, improved reporting capabilities, online services, enhanced audibility, improved visibility, faster auditing processes with reduced timeline intervals, and more features powered by automated sensors.
Regulatory Changes
The Australian Securities Exchange (ASX) has gone through many changes. In 2006, Treasurer Peter Costello implemented the New Corporation Law, which replaced the previous one. This new law included ASX Listing Rule 3.1, which made it necessary for listed companies to always tell investors about anything that could affect their confidence or the company’s securities.
The change’s goal was to improve corporate governance and give investors more protection in Australia’s securities markets. ASIC has kept modifying the regulations to give investors more protection and increase transparency requirements.
- ASX Listing Rule 3C added more disclosure, especially related to transactions between directors or management which could create a conflict of interest.
- Other changes have strengthened the requirements to be more transparent regarding the payment of directors and executives in public companies.
Impact
The Australian Securities Exchange (ASX) has been around since 1987. It has made a huge difference to the finance industry in Australia. It has given us a dependable system for trading financial instruments. Transparency and liquidity have been provided by the ASX too. It has also helped create an efficient infrastructure for financial services.
Let’s investigate the effect of the ASX over the years:
Impact on the Economy
The Australian Securities Exchange (ASX) is a major international stock exchange. It provides the capital market’s listings, trading, clearance, and settlement services.
The ASX is essential to Australia’s economic prosperity. It provides capital to Aussie companies from local and overseas investors. It lists both national and international markets. Services include listing, trading, clearance, settlement, issuing company securities, buying back company shares, research, data collection, and analysis.
The ASX’s transactions give buyers, and sellers access to funds. It reduces risk in the financial system by providing credit guarantees. It encourages the borrowing of funds and improves competitiveness between firms.
The ASX attracts foreign investments by having low transaction fees. As a result, it helps with cross-border investment opportunities and better infrastructure development. It also encourages more efficient applications of end-use technologies, benefiting various sectors of the economy.
Impact on Investors
The ASX has a long history of technological and economic developments. In 1987, it was partly privatized and began to use electronic order entry and order matching. This change increased liquidity and reduced fees for investors.
In 1998, the ASX was corporatized, and new clearing, settlement, and surveillance systems were implemented. It increased transparency through regular price updates and allowed real-time public stock offerings.
ASX also formed agreements with New Zealand in 1987 and Singapore in 1999 to increase foreign investor access. It resulted in more money managers investing in Australian securities, generating more investment activity.
In 2020, ASX updated CHESS to facilitate market activity during the coronavirus pandemic. Mergers between bourses are also taking place as exchanges seek scale and efficiency. Thanks to ASX, investors have easy and confident access to Australian financial securities at competitive prices.
Conclusion
The ASX is a longstanding part of Australia’s finance industry. It gives companies a platform to issue and buy securities. Its reach has increased a lot; its market capitalization and the number of listed companies have grown. Let’s have a look at what can be learned from this development:
- The growth in market capitalization.
- The increase in the number of listed companies.
Summary of the Australian Stock Exchange
The Australian Securities Exchange (ASX) is the main stock market for Australia and New Zealand. It was established in 1987 when six state-based stock exchanges combined to form one national Exchange. The ASX offers a platform for trading different financial products, such as stocks, derivatives, and Exchange Traded Funds (ETFs).
The ASX is a regulated market with firm rules to protect investors and guarantee transparent and efficient markets. Companies listed on the ASX must meet strict standards regarding finances, corporate governance, and continuous disclosure obligations.
Since its establishment, ASX has seen remarkable growth. It is now an international hub for investment opportunities and Australia’s most significant capital market. As of 2021, more than 2,200 companies are listed on the ASX with a common value of over AUD 2 trillion – this makes it one of the 20 largest stock exchanges in market capitalization.
